What is Employee Relationship Management and Why is it Important?

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Employee relations is a hot-topic buzzword in business circles these days, and for good reason: the relationship between an employer and its employees is an integral part to the longevity of any successful company or organization. But for something so critical to business operations, the details can be irritatingly vague and general.

Our guide to employee relations provides an overview of what employee relations entails, reasons as to why it is so important and some strategies that any company—big or small—can try implementing to improve the relationship employers maintain with employees.

Employee relationship management (ERM) has become a critical focus area for organizations looking to boost engagement, productivity, and retention in recent years. But what exactly is ERM and why does it matter?

ERM refers to the strategies and practices HR teams use to foster positive relationships between employees, managers, and the overall organization. The goal is to create a workplace environment built on trust, communication, and collaboration.

When done right, an effective ERM program can benefit both employers and employees in multiple ways. In this comprehensive guide, we’ll explore what ERM entails, its importance, best practices, and more.

What is Employee Relationship Management?

Employee relationship management is the process of actively developing and managing relationships in the workplace. ERM focuses on two main types of work relationships:

Employee-organization relationships This involves the bond between employees and the company as a whole. It encompasses how connected employees feel to the organization’s mission values, culture and leadership.
Employee-employee relationships These are the interpersonal relationships between coworkers across teams and departments. ERM aims to facilitate teamwork communication, and collaboration among employees.

In addition to strengthening these two central relationships, ERM also works to improve manager-employee relationships by equipping leaders with the skills to better support their teams.

The overall objective is to create an environment built on openness, respect, and trust. ERM lays the foundation for a positive employee experience where people feel engaged, valued, and committed to the organization’s success.

Why is ERM Important for Organizations?

Investing in employee relationship management pays off tremendously for companies in the form of:

1. Increased Employee Engagement

Employees who feel valued and connected with their team and organization tend to be much more motivated and invested in their work. Gallup found that teams with high employee engagement rates are 21% more productive and have 28% less internal theft than those with low engagement.

2. Enhanced Talent Retention

Good workplace relationships are a key driver of employee loyalty. Employees who have strong bonds with their coworkers and managers are less likely to leave the company. Replacing employees can cost between 16% to 213% of their salary. ERM’s retention boost saves significantly on these turnover costs.

3. Smoother Change Management

Organizations that have built trust and two-way communication through ERM find it much easier to gain buy-in for major changes. Engaged employees are more likely to give new initiatives and transformations a chance when their opinions are sought out.

4. Increased Innovation

Positive employee relations lead to better collaboration. When teams trust each other and feel psychologically safe to brainstorm, they generate more innovative solutions. A study by Google found that psychologically safe teams had 13.5% greater profitability.

5. Stronger Employer Brand

Companies with a reputation as a great place to work find it easier to attract and retain top talent. Employees are your best brand ambassadors. When they are satisfied at work, it shows in enhanced customer satisfaction too.

Benefits of ERM for Employees

While ERM’s organizational benefits are clear, it also directly impacts employee experience. Employees reap the following advantages when their company invests in ERM:

Increased job satisfaction and engagement
Sense of community and belonging at work
More learning and growth opportunities
Improved communication and transparency from leadership
Positive and supportive work environment
Better work-life balance

By making employees feel cared for, ERM boosts workplace morale, health, and commitment.

Types of Employee Relationship Management

There are two main approaches organizations take to managing workplace relationships:

1. Proactive ERM

Proactive ERM focuses on building strong relationships and heading off issues before they arise. Companies using this approach:

Regularly survey employees to monitor engagement and satisfaction
Provide ongoing training and development opportunities
Use reward and recognition programs to celebrate achievements
Promote open dialogue and transparency at all levels
Invest in team building and social activities

Proactive ERM emphasizes relationship-building as part of everyday operations. It results in higher trust, cohesion, and collaboration.

2. Reactive ERM

Organizations using a reactive approach only address relationship problems as they come up. For example, they may:

Wait for serious conflicts between teams before intervening
Only listen to employee concerns during exit interviews after turnover happens
Neglect lack of collaboration and silos until projects start failing

While still well-intentioned, reactive ERM allows issues to fester and erode workplace relations and culture. It tends to be more paternalistic than proactive.

Proactive ERM yields far better results by taking preventive measures. It aligns well with modern people-centric management philosophies.

The Role of HR in ERM resources teams play an integral role when it comes to cultivating healthy workplace relationships. Here are some of the key responsibilities of HR in regards to ERM:

Fostering organizational culture: HR defines and communicates company values, norms, and behaviors that shape cultural tone. They model and reinforce these through training, hiring, etc.
Managing change: During periods of transition, HR ensures clear communication and handles rollout in an inclusive way that maintains trust.
Strengthening manager-employee relationships: HR trains leaders and provides resources for effective coaching, feedback delivery, and development planning.
Resolving conflicts: When disputes arise, HR gets involved to mediate objectively while preserving working relationships.
Measuring and monitoring engagement: Conducting pulse surveys, exit interviews, and regular check-ins allows HR to identify gaps proactively.
Providing community-building opportunities: HR organizes initiatives like peer mentoring programs, employee resource groups, and social activities.
Ensuring equitable policies and practices: HR is responsible for mitigating biases and ensuring fairness and inclusivity.

Investing in thoughtful programs across these areas is how HR teamstangibly improve employee relations and experience.

Challenges in Employee Relationship Management

While positive employee relations sound ideal in theory, it takes continuous effort to make work harmoniously in practice. Some common hurdles organizations face include:

Mismatched Employee Expectations

Sometimes leadership has a disconnect with what employees actually expect or need from their workplace experience. Lack of flexibility or growth opportunities often underlies deteriorating engagement. Regular listening through stay interviews and surveys helps close this gap.

Unconscious Biases

Even when policies aim to be meritocratic, unconscious biases around factors like gender, race, age, and personality type can strain working relationships and cause employees to feel excluded or overlooked. Anti-bias and diversity training are key to countering this.

Resistance to Change

Employees often balk at change efforts if they aren’t involved collaboratively in shaping the process. Insufficient transparency around “why” the change is happening and what will be impacted leads to uncertainty and skepticism.

Lack of Accountability

When HR or managers let poor behavior, like harassment or bullying by toxic employees, slide without consequences, it directly damages workplace relationships and psychological safety. Swift intervention is required.

Excessive Workload

When teams are severely understaffed and individual workloads become unsustainable, anxiety rises, and people stop collaborating effectively. Restoring balance helps realign priorities and relationships.

Ineffective Leaders

Managers who lack empathy, self-awareness, and emotional intelligence foster mistrust among employees. Relying only on reactive tactics without proactively developing managers hampers relationship-building.

While challenges like these are common, the impact on engagement and culture can be proactively mitigated through ERM best practices.

Best Practices for Employee Relationship Management

HR has a wide range of options when it comes to designing an effective ERM program for their organization. Some key best practices include:

1. Invest in Ongoing Training

Make learning a core component of employees’ tenure, not just a one-time onboarding event. Offer regular soft skills and technical skills training. Sponsor external development opportunities. A learning culture makes employees feel valued.

2. Schedule Regular 1-on-1s

Managers should meet with each direct report biweekly or monthly for open conversations about their work, development, concerns, and goals. This consistent investment in their growth improves the rapport tremendously.

3. Foster Workplace Community

Organize team outings, companywide social activities, volunteering programs, and events to celebrate achievements or diversity. An environment of camaraderie and inclusion is foundationally important for ERM.

4. Share Organizational Updates

Communicate company news, changes, and wins transparently through town halls, emails, intranet portals, etc. Unsubstantiated rumors thrive when people lack context around decisions. Promote two-way dialogue.

5. Leverage Pulsing Surveys

Use quick, frequent pulse surveys on employee engagement, manager quality, burnout risk, workplace climate, etc., to gauge gaps real

what is employee relationship management

Settling Disputes and Conflicts

Unfortunately, it’s a fact of life that people will disagree with each other. The more people are involved in the disagreement, the greater the overall discontent, and by extension, the impact on the workplace. In cases such as this, the role of employee relations is to resolve the conflicts before they start to spiral and negatively influence others. This is also true for disputes or issues the employee has with the company.

Vertical and Horizontal Employee Relations

You may hear the terms “vertical and horizontal employee relations” thrown around like dares by the limbo bar at the latest company party, but don’t worry: you don’t have to break your back to understand them. These terms describe the two main hierarchies in employee relations. All employee relations issues and strategies will involve one, or both, of these groups.

Vertical Employee Relations: This refers to relationships between an employee and his or her superiors (e.g., management, executives, administration).
Horizontal Employee Relations: This term encompasses all same-level employee-to-employee relationships, including employees who are working together on a project or employees who are simply sharing a chat during break time.

What is Employee Relations?

What is employee relationship management?

Employee relationship management (ERM) is an element of human resources management that focuses on building strong, positive relationships between employees and their managers. HR professionals, managers and team leaders might participate in ERM by adopting formal policies and procedures, including:

What is employee relationship management (ERM)?

Employee relationship management (ERM) is a process organizations take to build healthy relationships. ERM efforts build morale, connect team members, and identify pain points within the organization. HR teams and leaders applying best practices in conflict resolution and employee engagement creates a safe and interactive workplace culture.

What is employee relations?

(ER), often part of the human resources department, is responsible for creating positive relationships and cultivating a constructive work environment that increases employee engagement, employee productivity and employee satisfaction. Many workplaces have a designated employee relations department.

Why is relationship management important in the workplace?

Relationship management in the workplace helps build effective teams where employees respect each other, listen to new ideas, and work seamlessly as a team. You don’t want your best talent to be scared away by cold employee relations. Confusion, stress, and tension make for bad employee experiences.